Florida's New Entertainment Industry Incentive

On Friday April 30th, 2010, the last day of the legislative session, the Florida House unanimously passed SB 1752, the comprehensive jobs bill which contains entertainment industry incentive language. SB 1752 is now headed to the Governor for signature.

In addition to a long menu of tax cuts and incentives designed to stimulate business and create jobs, SB 1752 replaces Florida’s existing film and entertainment incentive. Florida's old system (first enacted in 2003) was a cash reimbursement of qualified expenditures. SB 1752 replaces the cash reimbursement for qualified entertainment industry projects with a transferable credit against sales and corporate income taxes for qualified expenditures.

As in years past, the Florida legislature has appropriated a fixed amount that will be available as an incentive for the entertainment industry for this fiscal year ("FY"). Unlike previous years, SB 1752 promises a program that will last for 5 years, with a tax credit pool of $75 million annually from FY 10-11 to FY 14-15. The credits under SB 1752 cannot be claimed against tax liability until after July 1, 2011. The anticipated date for accepting applications for the new program is June 7th, 2010 starting at noon EST.

Section 1 of SB 1752 makes a number of significant changes to Florida’s current film and entertainment incentive program.

This section:

Replaces the cash refund incentive dependent on annual legislative appropriations with a transferable tax credit program. As noted above, the amount of tax credits available is $75 million annually, beginning in FY 10-11 through FY 14-15; and the tax credits cannot be claimed prior to July 1, 2011.

Specifies that these tax credits:

Can be carried forward for up to 5 years.

Can be transferred one time only to any other taxpayer, or can be distributed to the partners or other affiliated companies of the original recipient of the tax credits.

SB 1752 also reorganizes the current production “queues:”

94 percent of the tax credits (or $70.5 million annually) would be allocated to the “general production queue” that includes movies, television series, video games, visual effects, digital animation, and most other types of entertainment productions except commercials, music videos, and independent Florida films. To be eligible, the production must make a minimum $625,000 in qualified expenditures. The tax credit per production is 20 percent of qualified expenditures and is capped at $8 million per production.

3 percent of the tax credits (or $2.25 million annually) would be allocated to the “commercial and music video queue.” A production company under this category must spend at least $100,000 in qualified expenditures per commercial or video, and must exceed a threshold of $500,000 in qualified expenditures in a single state fiscal year. The tax credit is 20 percent of qualified expenditures, up to a cap of $500,000.

3 percent of the tax credits (or $2.25 million annually) would be allocated to the “independent production queue,” which includes independent Florida films and smaller-scale digital media productions. To be eligible, the production must make a minimum of $100,000 and a maximum of $625,000 in qualified expenditures, and meet other requirements unique to this queue. The tax credit is equal to 20 percent of qualified expenditures. The individual production cap is $125,000.

Makes available the “off-season” and “family-friendly” bonuses as in years past, but rewords their application:

The off-season bonus remains at 5 percent of qualified expenditures, and would be available only to feature films, independent films, or a television series or its pilot.

The family-friendly bonus is increased from 2 percent to 5 percent of qualified expenditures. The new language incorporates the existing criteria, plus an additional requirement – that the production not exhibit “gratuitous violence.”

Sunsets the tax credit incentive program on July 1, 2015.

Similar to its current duties, the Governor’s Office of Film and Entertainment ("OFE") would qualify productions as eligible to receive the tax credits, and also review audited expenditure documentation from the qualified production companies before the tax credits are released.

The application process for the new tax credit incentive program is very similar to that in existing law for the cash incentive. The applications are received and processed by OFE within 15 days of the submission, and as a production winds down, the production submits an audited report of qualified expenditures to OFE for its review.

OFE submits its recommendations to the Governor’s Office of Tourism, Trade, and Economic Development ("OTTED"), which determines and approves the final amount of tax credits (rather than the amount of cash incentive) to be awarded.

New in the bill: OTTED also must notify the Department of Revenue ("DOR") that a certified production has met the requirements for a specific amount of tax credits, and if the production has decided to transfer those credits to another entity, in what amount.

Both OTTED and DOR are given specific rule-making authority to administer the tax credit incentive program. OTTED may adopt rules specifying requirements for the application and approval process, records need to substantiate the eligibility for the tax credits and to claim or transfer the credits, and marketing requirements for tax credit recipients. DOR’s rules may include examination and audit procedures required to administer the program, and the manner and form of documentation required to claim or transfer the tax credits.